Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Theravance Inc (THRX), Elan Corporation, plc (ADR) (ELN), GlaxoSmithKline plc (ADR) (GSK): Biotech Companies Breaking Up

If pharmaceutical companies can break up, why not biotech companies?

Following in the footsteps of Abbott Laboratories (NYSE:ABT) spinning out its drug division into AbbVie Inc (NYSE:ABBV), and Pfizer spinning out its animal health division into animal health products into ZoetisTheravance Inc (NASDAQ:THRX) is splitting up.

Unlike big pharma though, biotech companies don’t tend to have multiple products that have little to do with each other. Instead, Theravance Inc (NASDAQ:THRX) is separating its products, which should be generating revenue shortly, from those that will burn cash for awhile.

Theravance Inc (NASDAQ:THRX) isn’t the first biotech to think of the idea. Multiple biotech companies have made similar splits with varying degrees of success.

A few years ago, genetic-tests maker Myriad Genetics, Inc. (NASDAQ:MYGN) spun off its drug discovery business, Myrexis. It didn’t work out too well for investors that held, either. Myrexis is trading on the pink sheets, nearly worthless, while Myraid is down about 25% since the split. Of course, you could argue that Myriad Genetics, Inc. (NASDAQ:MYGN) would be down more if it had held onto the drug development business, which didn’t end up developing much.

PDL BioPharma Inc. (NASDAQ:PDLI) did much better with the spin out of its development stage program into Facet Biotech. The biotech started trading at $13 per share, and was eventually taken out by Abbott for $27. The main assets now reside in Abbott’s aforementioned spinout AbbVie in conjunction with Biogen Idec, which was developing the drugs with PDL. If the drugs are successful, maybe the duo will spin them out into a joint venture, completing the cycle?

Most recently Elan Corporation, plc (ADR) (NYSE:ELN) spun out its drug discovery business into Prothena. Without the burden of a drug discovery unit, the parent company is now being pursued by Royalty Pharma, although Elan isn’t keen on its current offer.

One has to think a potential sale is one of the driving forces in Theravance Inc (NASDAQ:THRX)’s decision. The assets that should be generating revenue soon — lung drugs Breo and Anoro — have been submitted to the Food and Drug Administration for marketing approval by Thervance’s partner GlaxoSmithKline plc (ADR) (NYSE:GSK). Much like PDL, the new biotech company will essentially be a holding company, collecting royalties from Glaxo, and paying it out to shareholders as dividends.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.